Sprague v. Vogt

• Decision Date: 30 July 1945
• Docket Number: No. 13054.,13054.
• Citation: 150 F.2d 795
• Parties: SPRAGUE v. VOGT et al.
• Court: U.S. Court of Appeals — Eighth Circuit

150 F.2d 795 (1945)

SPRAGUE v. VOGT et al.

No. 13054.

Circuit Court of Appeals, Eighth Circuit.

July 30, 1945.

M. E. Culhane, of Minneapolis, Minn., for appellant.

Joseph F. Cowern and John B. Burke, both of St. Paul, Minn. (Scott, Burke & Scott, Kyle & Kyle, and Wm. H. Gurnee, all of St. Paul, Minn., on the brief), for appellees other than E. C. Vogt.

Before SANBORN, WOODROUGH, and THOMAS, Circuit Judges.

WOODROUGH, Circuit Judge.

This appeal is taken to reverse a summary judgment of dismissal of an action brought by the trustee in bankruptcy of the Baltimore Investment Company to set aside alleged transfers of the property of the company claimed to have been made without consideration to the company and in fraud of its creditors, and to recover the property for the estate. The summary judgment was entered by the court upon hearing, under authority of Rule 56, F.R. C.P., 28 U.S.C.A. following section 723c, of a motion for such judgment, accompanied by the pleadings and affidavits in support and in opposition. The appellant asserts that the judgment was erroneous because his complaint shows on its face that it states a claim against defendants upon which relief can be granted, and the showing on the hearing of the motion discloses that there is a genuine issue as to material fact to be tried. He contends that he was and is entitled to a trial of the case in ordinary course.

The trustee's complaint is lengthy and includes allegations to the effect: That the Baltimore Investment Company was adjudicated a bankrupt on petition filed March 4, 1943, and that claims of unsecured creditors aggregating more than $6,000 have been filed and are unpaid. That at all times on and after August 1, 1933, the investment company was the owner of the property in St. Paul known as "Piedmont Apartments," consisting of 144 rental units and the furnishings therein, the realty being of the value of $100,000 and the personal property of the value of $20,000 at relevant dates. That the total rental value was $50,000 a year, and substantially all of the rental units were rented at all times since June 1, 1941.

That in December 1940 and thereafter, said property was the only property owned by the bankrupt. At that time Dorothy A. P. Burns, who was owner of a first mortgage on the realty in the amount of $11,000, had foreclosed her mortgage to the point of sale and issuance of sheriff's certificate of sale to her from which redemption could be made on or before January 22, 1941. The realty had also been sold for taxes amounting to about $38,000 and the time for redemption from the tax sale would expire about June 1, 1941.

That E. C. Vogt owned a majority of the capital stock of the bankrupt corporation and he and one C. W. Hart were directors and officers and controlled and dominated it. That while the company's affairs were in the situation described, and the expiration of the period of redemption from Mrs. Burns' mortgage foreclosure sale on January 22, 1941, was imminent, one J. Lisle Jesmer, a lawyer, acting for his corporation, Ganlisle Holding Company, of which he was the alter ego, entered into an agreement in writing with E. C. Vogt of date December 31, 1940, attached to the complaint and identified as Exhibit "A," concerning the clearing of the title to the bankrupt's property from the tax and mortgage sales and from a chattel mortgage said to cover the furnishings; and on January 9, 1941, Mrs. Burns, having full knowledge of the contract, and to carry out a previous oral agreement with E. C. Vogt and J. Lisle Jesmer, gave Ganlisle Holding Company an option in writing wherein she agreed to take title to the realty by virtue of her foreclosure sale if there was no redemption, and then convey it to Ganlisle for the sum of about $8,500.¹

That the contract, Exhibit "A" (subsequently amended by Exhibit "D" between the same parties), included provisions by which it was agreed that if Ganlisle Holding Company obtained the property it would sell and Vogt, agent, would buy it on certain conditions, one of them being the assumption of a $25,000 mortgage on the property, which it was agreed should be executed by Ganlisle and the proceeds applied in discharge of Mrs. Burns's mortgage and the tax sale, it being known to the contracting parties that the taxes could be settled for $18,500 and that Mrs. Burns would reduce her lien from $11,000 to $8,500. That further and supplemental contracts were subsequently entered into between Mrs. Burns and Jesmer's corporation, and between Jesmer's corporation and Vogt, agent (including Exhibit "D," above referred to), looking to the same object, i. a., of clearing the title of the Burns mortgage sale and the tax sale and a chattel mortgage said to exist against the personalty so that the new loan could be made and secured by first mortgage, copies of all of which writings were attached to the complaint.

That after the expiration of the statutory period for redemption from the mortgage foreclosure sale and in February 1941, Mrs. Burns did apply to the District Court of Ramsey County, Minnesota, under Section 508.58, Minn.St.1941, Torrens Registration Act, for a certificate of title to the real property and registration thereof, alleging that through the foreclosure sale and lapse of the redemption period she had become the owner in fee of the property subject only to her contract to sell it to Jesmer's corporation (Ganlisle), and after due notice to parties interested, including Baltimore Investment Company and apparently some but not all of its creditors, and hearing, the court ordered certificate and registration of title in Mrs. Burns, subject to her contract to sell, as prayed. Upon completion of such registration the property was conveyed by Mrs. Burns and her husband to Jesmer's corporation (Ganlisle).

A compromise was effected with the state whereby the $38,000 tax liens were settled for $18,500. The sum of $25,000 was borrowed from the Minnesota Federal Savings and Loan Association on first mortgage of the real and personal property of which $18,500 was applied on the tax settlement. Jesmer's corporation did not use any part of the $25,000 to pay the $8,500 to Mrs. Burns called for in its written contract with her, referred to in the Torrens proceedings, but gave to her and one Alvin B. Christofferson, an attorney, a second mortgage on both the real and personal property for $11,000, securing a note to her for $8,500, and a note to him for $2,500; said note to Mrs. Burns so secured being the consideration received by her for her conveyance.

It was further charged that under the contract of December 31, 1940, Exhibit "A," Jesmer's corporation, without using any of its money, was to act as the conduit through which title to the real estate so far as the record title was concerned, was to pass from Mrs. Burns to E. C. Vogt, and that E. C. Vogt and J. Lisle Jesmer entered into the contract for the purpose of defrauding the unsecured creditors of the Baltimore Investment Company and especially those named in the complaint as having unpaid claims filed in the bankruptcy by making it appear from the record title that the title had passed to Mrs. Burns beyond redemption (whereas, it is argued that in truth only a lien was intended to be claimed, and the right of the investment company to redeem was at all times preserved to it by the agreements of Vogt, Jesmer and Mrs. Burns).

The decree for registration of the title (also attached to the complaint, Exhibit "C") recited that Jesmer's corporation (Ganlisle) "is now in possession of said premises under said contract for deed," meaning a contract for deed given by Mrs. Burns and her husband to Ganlisle of date May 20, 1941 (attached to the complaint, Exhibit "B"), which amends or supersedes the previous contract between the same parties of date January 22, 1941. In that contract it was provided, "It is expressly understood and agreed however, that the vendors Mrs. Burns and husband are not obligated hereunder to deliver such possession of the Piedmont realty but the vendee, if it desires to take possession shall use its own measures for that purpose," and the conveyance which Mrs. Burns promised in the contract was to be "a special warranty deed of said premises." The complaint alleged that J. Lisle Jesmer purporting to act for Ganlisle Holding Company, and later for another of his corporations, the Jesmer Company, to which the property was conveyed without consideration and of which he was the "alter ego," entered into possession of the real and personal property on or about January 22, 1941, and has remained in possession thereof at all times since and has at all of said times and still is collecting the rents and profits and claiming to be the owner.

The trustee's claim that the personal property of the bankrupt (the apartment furnishings), of the alleged value of $20,000, which was the only remaining asset of the bankrupt, was transferred in fraud of creditors, is not entirely distinct and separate from his claims as to the alleged fraudulent transfer of the realty. It was alleged that "without this furniture, fixtures and equipment or similar furniture, fixtures and equipment, the Baltimore Investment Company would be unable to rent said apartments furnished," and "That in furtherance of the fraud, hereinbefore alleged, and without corporate action, and without consideration to the Baltimore Investment Company, and for the use and benefit of E. C. Vogt and J. Lisle Jesmer, an alleged bill of sale of all of the furniture, fixtures and equipment of the Baltimore Investment Company was made by E. C. Vogt to Ganlisle Holding Company. That E. C. Vogt purported to act for the Baltimore Investment Company in making such bill of sale."

J. Lisle Jesmer and his corporations were alleged to be insolvent and the prayer of the complaint seeking recovery of the real and personal property for the bankrupt estate included a prayer for the...